Apex Court-Promissory notes & Cheques

 

advocatemmmohan

Apex Court

Promissory notes & Cheques 

Mode of citation : 

2016 [6] APEX COURT Civil Appeal  No(s).  3345-3346/2008-BALRAM ETC.-vs-LAXMI NARAYAN 

Murali Mohan. M.

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  Head Notes

  1. Notice is not compulsory for filing promissory note suit – if any defects are there in the notice – carries no value when the plaintiff proves his case .
  2. A member of the cooperative society cannot claim for filing  of a regular civil suit by the plaintiff Bank.
  3. Mere using the word as Security  in the promissory notes- not means  that no prosecution be launched -since the cheque were issued on a condition to pay the amount within one month, else it can be presented – a conditional one , in event of dishonour, prosecution was launched – nothing wrong in it.
  4. Accused could not  confuse the court without pleadings and evidence -When the accused failed to question & to adduce evidence that the promissory note was got up in rebuttal – when income tax returns also shows the liability of the accused – The entries in Ex-D1 appear to be entries in connection with the said chit fund scheme.  The transaction reflected in Ex-D1 cannot be confused   with    the    loan    of    Rs.5   lakhs     given    by   the complainant to the accused evidenced by promissory note (Ex-P1) and cheque (Ex-P2). As there was no such stand in reply notice. 
  5. Section 139 of the Contract Act.- Guarantor can not escape his co obligation as he agreed  in the guarantee deed under clause 2 and 3
  6. EVEN  A HAND WRITING NOTICE IS ALSO A NOTICE -LIMITATION COUNTS FROM THAT DATE IN CHEQUE BOUNCE CASE
  7. MERE ADMISSION OF HIS SIGNATURE ON SUIT PRONOTE IS NOT ENOUGH WHEN SUIT PRONOTE WAS MATERIALLY ALTERED BY ADDING 1  BEFORE 25,000 AND MAKING AS 1,25,000/– SUIT IS LIABLE TO BE DISMISSED DUE MATERIAL ALTERATION
  8. Sec.139 NI Act More specifically, Apex courts have been asked to clarify the manner in which this statutory presumption can be rebutted.-Mere discrepancy when the cheque was handed over to him  in the evidence of complainant does not reveal the accused from discharging his burden under 139 NI Act as he admitted his signature on the cheque – his plea of blank cheque was proved wrong as he himself instructed the bank to stop payment with cheque number and date – mere stop payment did not cease his liability  – non reply to the notice  forthwith not discharged the accused from his burden 
  9. when the respondent/complainant admitted that he had received Rs.77,31,500/- as per Exhibit P-9 statement while the total amount of work as per Exhibit D-3 agreement was Rs.78,70,678/-  and when  there was no evidence to conclude that any measurement of the work was done and the accounts were settled and when  the cheque was not in the handwriting of the appellant strengthens the defence version that it was not executed in favour of the respondent. And when There was no reliable documentary evidence adduced by the complainant to hold that a sum of Rs.25 lakhs was due to him warranting execution of Exhibit P-1 cheque. . There was no amount legally due to the respondent to hold that Exhibit P-1 cheque was as a matter of fact issued by the appellant in favour of the respondent in order to hold that he was a holder of the cheque. – entitled for acquittal. The reverse version of the High court that accused has to prove that there is no due to the accused is nothing but perverse one.
  10.  Regarding admissibility of a document  whether it is a bond or promissory note requires stamp duty or not ? – could not be disturbed by the Division Bench as the scope of supervisory jurisdiction of the High Court under Article 227 of the Constitution does not cover this type of case.
  11. UN ACCOUNTED AMOUNT CAN NOT BE RECOVERED – CHIT AMOUNT WITHOUT LICENCE CAN NOT BE RECOVERED – IN KERALA WITHOUT MONEY LENDING LICENCE NO AMOUNT BE RECOVERED – NO PRESUMPTION WILL BE AVAILABLE FOR UN ACCOUNTED AMOUNT.
  12. LEGAL HEIR CAN FILE A CHEQUE BOUNCE CASE

A complaint under Section 138 of the Act can be filed by the payee or, as the case may be, the holder in due course of the cheque. Can it be said that the respondent wife (since deceased) is not the ‘holder in due course’ of the cheque? 

  1. Premature complaint can not be taken on representation – fresh be filed – we observe that the payee or the holder in due course of the cheque may file a fresh complaint within one month from the date of decision in the criminal case and, in that event, delay in filing the complaint will be treated as having been condoned under the proviso to clause (b) of Section 142 of the NI Act.
  2. Mere fault of mentioning incorrect amounts  of one lakh fifty thousands ,in the statutory notice instead of one lakh what cheque bears – does not make the case liable to be quashed.
  3. Power of attorney holder – what are the requisite materials for presenting cheque bounce case-whether examination of the complainant is necessary ? Whether power of attorney can be questioned for the first time in Revision ?

the legal position and answered the questions in the following manner. 

 “(i) Filing of complaint petition under Section 138 of NI Act through power of attorney is perfectly legal and competent. 

(ii) The Power of Attorney holder can depose and verify on oath before the Court in order to prove the contents of the complaint. However, the power of attorney holder must have witnessed the transaction as an agent of the payee/holder in due course or possess due knowledge regarding the said transactions. 

(iii) It is required by the complainant to make specific assertion as to the knowledge of the power of attorney holder in the said transaction explicitly in the complaint and the power of attorney holder who has no knowledge regarding the transactions cannot be examined as a witness in the case. 

(iv) In the light of section 145 of NI Act, it is open to the Magistrate to rely upon the verification in the form of affidavit filed by the complainant in support of the complaint under Section 138 of the NI Act and the Magistrate is neither mandatorily obliged to call upon the complainant to remain present before the Court, nor to examine the complainant or his witness upon oath for taking the decision whether or not to issue process on the complaint under Section 138 of the NI Act. 

(v) The functions under the general power of attorney cannot be delegated to another person without specific clause permitting the same in the power of attorney. Nevertheless, the general power of attorney itself can be cancelled and be given to another person.” 

Thus, it is clear that the complaint under Section 138 of the NI 17 Act can be filed through the power of attorney holder. 

  1. when a cheque is issued by a person who has signed on the cheque and the complainant reasonably discharges the burden that the cheque had been issued towards a lawful payment, it is for the accused to discharge the burden under Section 118 and 139 of the N.I. Act that the cheque had not been issued towards discharge of a legal debt but was issued by way of security or any other reason on account of some business transaction or was obtained unlawfully – PROVIDED THAT under Sections 139, 118 (a) and 138 of the N.I. Act existence of debt or other liabilities has to be proved in the first instance by the complainant but thereafter the burden of proving to the contrary shifts to the accused.
  2. Whether FOUR cases had been heard together or separately ?

Sent one notice in terms of Section 138 of the Negotiable Instruments At, 1881 with regard to bouncing of all the four cheques. BUT FILED FOUR COMPLAINTS .

  1. Whether an accused can ask  the court  the sentences awarded  to him in several cheque bounce cases – running concurrently instead of  run consecutively under Sec.427 read with Sec.482Crpc ? yes.
  2. Cheque bounce case against a company – when the company wound up and an official liquidator was appointed, he should be impleaded as one of the party for representing the company accused but the director liability issue was left open.
  3. Sec.318 of NI Act & Sec.319 of Crpc – a partner can be summoned and it can not be rejected as on earlier occasion no summon was issued
  4.  whether after the notice issued under clause (b) of Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred to as “the Act”), is received by the drawer of the cheque, the payee or holder of the cheque, who does not take any action on the basis of such notice within the period prescribed under Section 138 of the Act, is entitled to send a fresh notice in respect of the same cheque and, thereafter, proceed to file a complaint under Section 138 of the Act.?  NO

BUT IF NOTICE WAS NOT SERVED – CHEQUE CAN BE PRESENTED AGAIN AND A FRESH NOTICE BE GIVEN AND COMPLAINT CAN BE FILED.

  1.  whether the post-dated cheques issued by the appellants (hereinafter referred to as ‘purchasers’) as an advance payment in respect of purchase orders could be considered in discharge of legally enforceable debt or other liability, and, if so, whether the dishonour of such cheques amounts to an offence under Section 138 of the Negotiable Instruments Act, 1881 -No.
  2. CHEQUE BOUNCE CASE – AFTER RECORDING 313 STATEMENT , IF ANY DOCUMENTS ARE RECEIVED AS ADDITIONAL EVIDENCE – WITHOUT RECORDING A SUPPLEMENTARY STATEMENT UNDER SEC.313 ABOUT THE DOCUMENTS AND WITHOUT GIVING OPPORTUNITY FOR FURTHER EVIDENCE – NO CONVICTION  BE PASSED BASING ON THOSE DOCUMENTS .
  3. When the cheque as well as the signature has been accepted by the accused ,the presumption under Section 139 would operate infavour of the complainant .So the burden shifts on the accused to disprove the cheque or the existence of any legally recoverable debt or liability. 
  4. When the accused  was not a Director on the date when the cheques were issued , no prosecution be launched against him under sec.138 of NI Act
  5. When the accused proved that  sale of woolen carpets had not taken place, there was no existing debt in discharge of which, the appellant was expected to issue cheques to the respondent. Thus the accused has discharged the onus of proving that the cheques were not received by the holder for discharge of a debt or liability. Under the circumstances the defence of the appellant that blank cheques were obtained by the respondent as advance payment also becomes probable and the onus of burden would shift on the complainant.
  6. When the notice was received by the accused should be mentioned in the complaint for the purpose of deciding whether it is premature or not – else no process of summons be issued.
  7. Sec.482 CrPC – High court –  whether the post-dated cheque can be construed as security towards any amount due to the complainant and whether the cheques in questions were subject of security are the question of fact which cannot be determined by the High Court under Section 482 Cr.P.C., till evidence are brought on record. Further the question whether the cheques in question were issued for discharge in whole or in part or any debt or other liability, is also a question of fact which cannot be determined by High Court in a petition under Section 482 Cr.P.C. 
  8. At the stage of summoning the respondents court has just to see 

Whether a prima facie case is made out against the accused or not under Section 138 of the N.I.Act.” But  not whether the respondents have made payment by way of bank drafts in lieu of the cheques which are subject matter of complaints can also be decided at the trial and not at the stage of summoning and by way of an application seeking to drop the criminal complaint proceedings. 

  1. Whether a complaint could be held to be maintainable without making the company a party – No

Whether the company could have been made liable for prosecution without being impleaded, and whether the Directors could have been prosecuted without the company having been arrayed as accused. 

when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. It has been further held therein that there cannot be any vicarious liability unless there is a prosecution against the company. In the case at hand, the company has been arrayed as the accused No. 1 along with the Chairman and other Directors. 

  1.  Whether the High Court while remitting the matter for adducing further evidence can  interfere with the order of acquittal passed by the Trial Court. ? – No
  2. whether the notice dated 2.01.2004 was issued within the stipulated period of thirty days from the date of receipt of intimation of the dishonour of cheque. If not the prosecution is liable to be dismissed – Principles of ‘Estoppel’ or ‘Waiver’ would not, therefore, apply in the instant case.
  3. Territorial – Jurisdiction of cheque bounce –  It is no longer arguable that the issuance of the notice has relevance to the question of criminal territorial jurisdiction under Section 138 of the NI Act. – where cheque was present & bounced has got jurisdiction.
  4. 1. Whether a power of attorney holder can present a complaint under Section 200 of the Code of Criminal Procedure? YES

2. Whether the power of attorney holder can prosecute the criminal proceedings without permission under Section 302 of Code of Criminal Procedure? NOT APPLICABLE

  1. The cheque was drawn on Bank account maintained in the name of unregistered firm in discharge of personal loan of two of its partners.- Third partner not signed on it as such , no prosecution be launched as cheque could not be Honour unless signed by the third partner even sufficient funds there.
  2. Mere non-mentioning of the date [of the notice and that of reply notice ] in the complaint petition would not entitle the accused to get an order of discharge when other materials are there to so establish that is notice and reply notice.
  3. Without adding the company as one of the accused, no prosecution be launched and when the cheque was issued one company and adding directors etc., of another company is not correct and as such the criminal case was quashed.
  4. Whether the debt was time barred or not can be decided only after the evidence is adduced, it being a mixed question of law and fact. Can not be decided under Sec.482 CrPC.
  5. Cheque issued under agreement of sale is lawful debt- cheque bounce can be filed.

the cheques issued under and in pursuance of the agreement to sell constitutes a legally enforceable contract between the parties to it and duly enforceable debt or liability for the purposes of Section 138. – 44- judgments of is contradictory one .

  1. Without adding a company as one of the accused – complaint is not maintainable whether it was imperative for the respondent to implead M/s H.R.Construction Pvt.Ltd. as a party respondent, in the proceedings initiated by him under Section 138 of the Negotiable Instruments Act, 1881?
  2. In the absence of  SPECIFIC pleadings  IN COMPLAINT and evidence about the role of Accused in the company and in the absence of notice to him, he should not be convicted.
  3. WHEN a period of six months had lapsed between the date of drawl of the cheque on 31st of December, 2005 and its presentation by the complainant on 30th of June, 2006 for payment, the petitioner cannot be prosecuted. BUT AFTER EXCLUDING THE DATE OF DRAWL 31/12/2005 – FROM 01/01/2006 TO 30/06/2006 – IT IS IN TIME.
  4. WHEN the cheque was not dishonoured on the ground that there was correction in the date of the cheque or that the signature of the appellant-accused differs AND WHEN the appellant-accused neither gave any reply nor explained as to why he has not sent reply to the notice – Exhibit No. 27 pointing out that the claim of the respondent is false and unacceptable to the appellant. – complaint can not be dismissed
  5. Cheque issued under an agreement of sale is not a debt for launching cheque bounce case [2015].

Whether  the cheque which was dishonoured issued in his favour by the appellants in pursuance of an agreement of sale of immovable property in his favour. Therefore, it does not constitute statutory offence punishable under Section 141 of the NI Act as it does not come within the purview of Section 138 of the NI Act as the same was not issued either towards discharge of any liability or the debt to the respondent.? – 39 judgement is a contradictory one. [2019]

  1. Whether the compensation can be imposed under section 357(3) of the Code as it does not co-exist with the imposition of fine. ?  No

Whether the fine can be increased to cover the sum of Rs. 20,000/- to Rs.22,000/-? No It can impose fine only Rs.5k [ now 10 k] 

  1. whether once the summoning order has been issued, the Trial Court would have no power to review its earlier order?YES.
  2. When as a director resigned before issuing cheques by the company – mere letter of guarantee issued by her LONG PRIOR TO ISSUES OF CHEQUES , can not fasten her WITH liability in cheque bounce case – absence of her role in the pleadings also makes the complaint defective and as such it is liable to be quashed against her.- Bold  questioning of her resignation can not sustain the  complaint being pending  against her till trial , when public records are not challenged and when new directors are added as accused who joined the company AFTER her resignation.
  3. When the cheque was admitted along with it’s signature – when a postman who knew the accused was examined about the service of notice, the burden lies on the accused and his failure to take steps against a property dealer to whom the accused handed over the cheques and the same was said to be misused.- no interference in conviction.
  4. Whether the court can impose default sentence of imprisonment on non-payment of compensation as held in  the Ahammed Kutty judgment ?.- N0 – as compensation was awarded as per NI Act though my mistake trial court mentioned as 357 (3) of Cr.P.C
  5. Whether the court can receive postal receipt as the acknowledgement card was denied during trial – under sec.311 CrPC as additional evidence at the time of arguments ? Yes, as it is not fill up latches & lacunas  but it is a fall out of an oversight committed.

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